Kozionas v Kozionas
[2017] QDC 320
•22 December 2017
DISTRICT COURT OF QUEENSLAND
CITATION:
Kozionas & Anor v Kozionas & Anor [2017] QDC 320
PARTIES:
VERONIKA KOZIONAS ATF KOZIONAS INVESTMENT TRUST
(applicant/second defendant)
v
PETER KOZIONAS
(respondent/first plaintiff)
AND
ESTER KOZIONAS
(respondent/second plaintiff)
AND
JAMES CHRISTOPHER KOZIONAS ATF KOZIONAS INVESTMENT TRUST
(respondent/first defendant)
FILE NO/S:
BD 3524/17
DIVISION:
Civil
PROCEEDING:
Application
ORIGINATING COURT:
District Court of Queensland
DELIVERED ON:
22 December 2017
DELIVERED AT:
Brisbane
HEARING DATE:
1 December 2017
JUDGE:
Richards DCJ
ORDER:
Application for stay dismissed. Paragraphs 5(b)(ii) to 5(b)(iv) and 17 of the Statement of Claim is struck out. The plaintiffs are to file an amended Statement of Claim within 31 days.
CATCHWORDS:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR DEFENDANT OR RESPONDENT: STAY OR DISMISSAL OF PROCEEDINGS – where there are proceedings in the Federal Circuit Court yet to be determined – whether the proceedings in the District Court should be stayed permanently or until the proceedings in the Federal Circuit Court have been determined
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – GENERALLY – where the defendant seeks to strike out parts of the statement of claim – whether parts of the statement of claim ought to be struck out
Civil Proceedings Act 2011, s 58
Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538
COUNSEL:
MD Evans for the applicant
MA Alexander for the plaintiff respondents
M Doyle for the first defendant respondent
SOLICITORS:
HopgoodGanim for the applicant
HWL Ebsworth for the plaintiff respondents
Conomos Lawyers for the first defendant respondent
The applicant seeks a stay of proceedings in this matter either permanently or until the proceedings in the Federal Circuit Court have been determined. Alternatively, if the application fails the applicant seeks an order striking out various parts of the statement of claim.
Facts
The defendants in this matter were husband and wife. They divorced in 2016 and are currently proceeding through the Federal Circuit Court in relation to the division of the marital property. The plaintiffs are the first defendant’s parents. The Kozionas family had a number of businesses that they ran together with other family members over a number of years. In attempting to estimate the property pool in the Federal Circuit Court, valuations were sought for a number of businesses including Kozcorp Projects Pty Ltd. The first defendant owned 35% of that company and on 25 September 2015, after the parties separated, he transferred his shares to his father Peter Kozionas. This transfer was said to happen the day after a heated discussion between the first and second defendant, where the first defendant stated to the second defendant “Kozcorp is mine, you won’t get your hands on Kozcorp.”
The second defendant claims there was no disclosure made about the transfer of the shares. It is claimed by the plaintiffs that the shares were transferred in satisfaction of a debt owing by the first and second defendants in their capacity as trustees of the Kozionas Investment Trust in a sum of $645,000. The plaintiffs claim that that principal has now been paid as a result of that share transaction and that interest remains outstanding in the sum of $478,685.65.
The applicant/second defendant claims that the plaintiffs were put on notice that there was a dispute over the validity of the share transfer, as it should have remained part of the property pool in the Federal Circuit Court proceedings. It was foreshadowed as early as December of 2016 that an application would be made pursuant to s 106B of the Family Law Act 1975 to have the transfer set aside and to join the plaintiffs to the proceedings in the Federal Circuit Court for that matter to be decided. On 11 September 2017, such an application was filed by the second defendant seeking leave to join the plaintiffs to the Federal Circuit Court proceedings and on 15 September 2017 the statement of claim was filed in this court seeking recovery of the debt.
In essence, although not stated specifically, the second defendant suspects that the share transfer was a sham transaction designed to remove valuable property owned by Kozcorp Projects out of the property pool and defeat the fair distribution of the marital property.
Submissions
The applicant seeks a stay of the proceedings in the District Court so that the matter can be decided at trial in the Federal Circuit Court, along with the rest of the property dispute. It is said that the stay ought to be granted because if the proceeding is not stayed and the matter proceeds to trial in the District Court, the plaintiffs and the first defendant will avoid scrutiny of the application of s 106B of the Family Law Act 1975 (Cth) in the proceedings in the Federal Circuit Court and that the District Court will not enquire into the adequacy of the consideration for the sale of the shares, but will only be concerned with whether there was in fact consideration. It is said this is because the law of contract does not concern itself with whether the consideration is adequate.
The applicant submits further that other factors in favour of the stay are that:
(a) The District Court proceedings have not advanced past claim and statement of claim and are at their very beginning;
(b) The plaintiff was forewarned of a s 106B application as early as 12 December 2016;
(c) It is not apparent that the first defendant will participate in the proceedings in the District Court but he will have to do so in the Federal Circuit Court where he will be subject to cross-examination (In fact the first defendant has filed a defence indicating that he admits all the facts in the statement of claim);
(d) Whilst the proceedings in the Federal Circuit Court will involve the plaintiffs being involved in a trial where not all the evidence may be relevant to them, this is outweighed by the inability of the District Court to grant s 106B relief and the significant prejudice of the matter proceeding first to trial in the District Court;
(e) The application to join the claim to the Federal Circuit Court proceedings was filed before the plaintiffs commenced the present proceedings in the District Court; and
(f) The Federal Circuit Court does have accrued jurisdiction to deal with the plaintiff’s claim.
For the plaintiffs and the first defendant it is submitted that this is a simple question of whether a debt is due and owing and that practically speaking the matter would be heard more expeditiously and economically if the matter were allowed to continue in the District Court.
The Law
The exercise of the court’s discretion to stay proceedings has been discussed in Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538 per Mason CJ, Deane, Dawson and Gaudron JJ:
“First, a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise. Secondly, the traditional power to stay proceedings which have been regularly commenced, on inappropriate forum grounds, is to be exercised in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious or an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case. Thirdly, the mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay. Finally, the jurisdiction to grant a stay or dismiss the action is to be exercised ‘with great care’ or ‘extreme caution’.”[1]
[1]Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538, 554.
Subsequent cases have discussed the Voth test but ultimately the test remains that any decision to stay a proceeding must be exercised with great care and that ultimately the rationale behind the exercise of the power is to avoid an injustice.
Discussion
In this case the property dispute in the Federal Circuit Court involves property upwards of $3,000,000. There are substantial variations in the estimates of the value of the property. There would appear to be eight separate legal entities involved in the marital property as well as personal and real property interests. Some of the legal entities are trusts and are companies, and all of them appear to be family owned businesses. All of those entities are yet to be valued. This loan would appear to be a discrete matter.
The applicant’s major objection to the matter proceeding in this court seems to be that he will be limited in his cross-examination of the parties to the particular debt and that the first defendant may not be required to give evidence because he has admitted the debt and all the matters in the statement of claim. It is difficult to know at this stage whether that is a real problem for the second defendant. If the second defendant’s defence is that the transaction was a sham, that the loan did not exist or that the shares were sold at an under value, all these matters can be litigated in the District Court. The argument that this court would only be concerned with whether there was more than a peppercorn consideration for the shares is with respect not a cogent one. The argument by the plaintiffs was that the shares represented payment of $645,000, namely the loan principal but other documents suggest that in fact the value of the shares may well have been up to $1,000,000 because they carried with them a debt of $400,000 owed to the first defendant. As such, the second defendant would be entitled to obtain a valuation of these shares and argue that if the loan did exist that the interest was extinguished upon the transfer of the shares. If agency is disputed then it is difficult to see how the plaintiffs can prove their case successfully without calling the first defendant.
Further, a finding in the District Court that the debt existed and had been extinguished by the sale of shares would be relevant to the Federal Circuit Court proceedings in relation to those shares, but if the second defendant is successful and proves that the debt did not exist or that there was no interest attached to those shares that would also be relevant to the Federal Circuit Court proceedings and whether the share transaction was a sham or sold at a significant undervalue. In those circumstances the second defendant could easily make a submission that a larger share of the property pool as it exists could be awarded to the second defendant because of the first defendant’s decision to transfer property which was clearly part of the property pool at an undervalue.
Additionally, there are practical considerations that speak against a stay in this matter. The plaintiffs are involved in a small portion of the division of this property. They would be brought into an action which may take a number of days in the Federal Circuit Court and as such, a hearing date would be set well into the future because of the significant list that exists in the Federal Circuit Court. The District Court has a smaller list and as such, if matters proceeded at a swift pace, then the matter could be heard at much sooner in the District Court. The practical effect of this being resolved in the District Court would mean that the trial in the Federal Court would be shorter, if for no other reason than it would not involve three different parties with competing interests. Accordingly, it seems to me, inappropriate for a stay to be granted in relation to this matter.
Alternatively, the second defendant has applied for some matters in the statement of claim to be struck out. It is submitted that the claim for interest pursuant to s 58 of the Civil Proceedings Act 2011 in respect of the interest on the loan be struck out as s 58(4)(a) excludes the giving of interest on interest. It is not clear in my view that the section precludes the award of interest in relation to a judgment given for damages as a result of unpaid interest on a loan. Certainly it is arguable that that could be the case and it could be argued at the trial of the action but I am not prepared at this stage to strike out that portion of the claim. The plaintiff also objects to paragraphs 5(b)(ii) to 5(b)(iv) on the basis that the conduct pleaded in paragraphs 5(b)(ii) to 5(b)(iv) occurred after the conduct forming part of the loan agreement. I agree that the allegations in paragraphs 5(b)(ii) to 5(b)(iv) are no more than evidence of payment of the loan and are not evidence of conduct amounting to an agreement to loan money. Accordingly those paragraphs should be struck out.
Finally, the second defendant objects to paragraph 17 of the Statement of Claim on the basis that the material facts are not pleaded as to how payments to one of the plaintiffs can be seen as satisfaction to both plaintiffs and whether this could be seen as a payment by the trust or on what authority the first defendant had to make payment on behalf of the trust. I agree that this paragraph needs to be more extensively pleaded to indicate the basis on which the principal was paid and, in my view, the plaintiffs should be given leave to file an amended statement of claim repleading that particular part of the action.
Order
Application for stay dismissed.
Paragraphs 5(b)(ii) to 5(b)(iv) and 17 of the Statement of Claim is struck out. The plaintiffs are to file an amended Statement of Claim within 31 days.
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